intech Engg. and Services (P) Ltd. Vs. Commissioner of C. Ex. - Court Judgment

Excerpt:
1. the stay application has been filed seeking waiver of pre-deposit of interest amount of rs. 53,917.45 confirmed under the impugned order.since i propose to dispose of the appeal itself on a short question of law, i grant waiver of pre-deposit of the amount and take up the appeal for decision with the consent of the parties. this appeal is directed against the order-in-appeal no. 17/2001 (m-iii), dated 7-2-2002 passed by the commissioner of central excise (appeals), chennai by which he has rejected the appeal of the appellants and upheld the order-in-original passed by the assistant commissioner who has confirmed the demand of interest of rs. 53,917.45 on the wrongly availed modvat credit.2. the brief facts of the case are that the appellants are engaged in the manufacture of lpg (brass) cylinder valves falling under chapter heading 8481.80. they had availed deemed modvat credit on brass waste and scrap after filing required declaration under rule 57g for the period july, 1991 to september, 1991. the deemed credit availed by the appellants was denied by the lower authority vide his order-in-original dated 11-11-92. on appeal, the commissioner (appeals) decided the issue in favour of the appellants vide his order-in-appeal dated 30-6-1993.aggrieved by the said order the department went in appeal before the cegat and cegat, new delhi decided the matter in favour of the department vide order no. 360/2000-b, dated 6-3-2000 [2001 (137) e.l.t.478 (t)] and set aside the order of the commissioner (appeals) by holding that since no duty has been paid on the defective/damaged valves which are the inputs used by the assessee, deemed credit was not available following the ratio of the tribunal's decision in the case of ankur steels and ors. v. cce, reported in 1999 (31) rlt 322. thereupon the appellants paid back the deemed credit of rs. 55,300/-availed by debiting the same in the pla on 19-6-2000. since the assessees have failed to pay interest in spite of instructions from the department as a result of deciding the matter in department's favour, show cause notice was issued to them proposing to demand interest for the period from august, 1995 to june, 2000 for an amount of rs. 53,917.45 and the same was confirmed by the original authority vide order-in-original dated 17-9-2001 and on appeal to the commissioner (appeals), the commissioner (appeals) upheld the order-in-original as noted above. it is against this order of the commissioner (appeals) that the appellants have come in appeal. in the grounds of appeal, the assessee-appellants, inter alia, stated as under : (a) it is imperative that the retrospective effect provided for the interest chargeable under section 11aa had not been provided for under modvat rules i.e. under rule 57-i(3). under rule 57-i (3), it was said that interest had to be demanded at the rate fixed under section 11aa for the amount determined under subsection (2) of section 11a. the emphasis is that the retrospective effect brought vide explanation 2 to section 11aa cannot be applied to the amount determined under rule 57-i(3) of c.e. rules, 1944, was not discussed in detail and in depth manner either by the commissioner (appeals) or the adjudicating authority who passed the o-in-o against which the assessee appealed to the commissioner (appeals). (b) on appeal by the assessee, the collector (appeals) set aside the order-in-original of the assistant collector vide order-in-appeal no. 61/93 (m), dated 30-6-1993. from the date of the order-in-appeal by the collector (appeals), they were relieved from the disallowance of the modvat credit by the then assistant collector of central excise, and there was no force in 1995 to the order-in-original passed by the assistant collector. at the time when section 11aa came into force there was no demand from the departmental side and also no due arose even after three months of section 11aa came into force as no valid order was available against them on the date. (c) that the commissioner (appeals) had fixed the personal hearing on their stay petition at 12.30 hours on 23-1-2002. however they were heard only on 29-1-2002 on the stay petition and they were not given any chance to explain the grounds taken in the main appeal before him and hence the order-in-appeal passed by him is not in consonance with the principles of natural justice.3. shri r. sasidharan learned sr. advocate for the appellants adverted to the facts of the case as narrated above and invited my attention to section 11aa and explanations to the proviso to section 11aa. he further submitted that the word "determined" means when the duty in dispute is finally settled by the tribunal or a court. the dispute in this case was finally settled by the tribunal on 6-3-2000 by order no.360/2000-b, dated 6-3-2000 and therefore, the interest can at best be charged from 6-3-2000 i.e. the date when the dispute was finally settled by the tribunal. he further submitted that since the duty pertained to the period july, 91 to september, 91 and since section 11aa has been introduced in the year 1995 and since there was no provision for levy of interest prior to introduction of section 11aa no interest could be demanded on the duty which was not paid wrongly. he also submitted that rule 57-i(5) clearly indicates the date from which the interest is to be paid i.e. from the first day of the month succeeding the month in which credit was wrongly taken till the date of payment of such duty, under section 11aa of the act. he, therefore, prayed for setting aside the impugned order.4. shri c. mani, learned dr on the other hand submitted that section 11aa clearly states that where a person chargeable with duty determined under sub-section (2) of section 11a fails to pay duty within three months from the date of determination, he shall pay interest in addition to duty. in the instant case, the assistant commissioner being the determining authority has determined the duty payable under rule 57-i of the central excise rules, 1944 and decided the issue on 11-11-1992. since section 11aa was introduced with effect from 26-5-1995 vide section 73 of the finance act, 1995 (22 of 1995), interest is required to be paid from 26-8-1995 (i.e. three months after the introduction of section 11aa at the rate prescribed under section 11aa) till the date of payment of interest, under the provisions of sub-rule (3) of rule 57-i of the central excise rules, 1944.5. i have considered the rival submissions and gone through the case records. in this case, the duty was determined by the assistant commissioner on 11-11-92 when he decided the case that the appellants are liable to pay duty. however, the duty was finally paid by them on 19-6-2000 as a result of the appeal being decided against them by the tribunal vide order no. 360/2000-b, dated 6-3-2000. the contention of the learned counsel for the appellants that the duty was determined only when the tribunal decided the matter on 6-3-2000 cannot be countenanced because the duty was first determined once the matter was decided by the proper officer and it was the assessee who being not satisfied of the decision of the assistant commissioner, filed appeal before the commissioner (appeals) who decided in their favour and on appeal by the department, the tribunal decided the matter in favour of the department. therefore, the determination of the duty was done by the assistant commissioner on 11-11-92 itself and the tribunal as the second appellate authority has only dealt with and settled the dispute between the two parties before it by confirming the order-in-original.therefore, it cannot be said that duty has been determined by the tribunal. as regards the ground taken by the assessee that the interest provision cannot be applied to the past cases, i observe that in terms of the provisions contained in sub-rule (3) of rule 57-i, read with section 11aa, where the duty amount has been determined before the date on which the finance bill, 1995 received the assent, interest is to be paid if the amount of duty is not paid, within three months from the date of the assent of the president at the rate as fixed by the cbec under section 11aa of the central excise act, 1944 from the date immediately after the expiry of the said period of three months till the date of payment. in this case, the duty was determined on 11-11-1992 by the assistant commissioner. the date of introduction of the proviso to section 11aa being 26-5-1995, interest was calculated from 26-8-1995 in terms of rule 57-i{3) ibid. as rightly held by the original authority, the corresponding provision for levy of interest in modvat rules is rule 57-i(3) of the central excise rules. this rule is to be read in conjunction with section 11aa and proviso thereto. in view of this clear legal provisions, the ground taken by the appellants that when section 11aa came into force, there was no demand from the revenue for payment of interest cannot be accepted. the appellants have also relied upon the order of the west regional bench of the tribunal in the case of mukand ltd. v. cce, mumbai-i reported in 1996 (88) e.l.t. 725 wherein it was held that liability to interest under section 11aa of the central excise act, does not commence till the dispute is finally settled by the appellate authority/court. it was also held that demand for recovery of interest when the matter is pending before the cegat was premature. the effect of this ruling is that the proceedings for recovery of interest cannot commence and has to be kept pending when the matter remains unsettled. in the case before me the show cause notice demanding interest was issued after the dispute was finally settled by the order of the tribunal dated 6-3-2000 and the order of the tribunal attained finality, since the assessee has not gone in appeal against the said order. therefore, the said case law does not help the appellants.6. as regards the other ground taken that they were not given any chance to make their points before the commissioner (appeals), i observe that the commissioner (appeals) in para 4 of the order-in-appeal has clearly stated that shri r. radhakrishnan, md and shri b. kumar, ao of the appellant-firm appeared and reiterated the grounds of appeal and it was after hearing them on the grounds of appeal, that the commissioner (appeals) proceeded to take up the appeal itself instead of the stay matter. the plea of the appellants that they have not been heard by the commissioner (appeals), therefore cannot be accepted. before parting with this case, i would like to observe that in this case, duty of excise which was due to the department as far back as july, 91 - september, 1991, was not paid by the assessee till 19-6-2000, as they wrongly availed the benefit of modvat credit and it was paid by them only on 19-6-2000. thus they have enjoyed the benefit of non-payment of duty up to 18-6-2000. therefore, they cannot have any grievance if they are asked to pay interest on the duty which was due to the govt., but was not paid by them. the demand of interest is also fully backed by the law as discussed above. in view of the above discussion, i am of the considered opinion that the impugned order cannot be found fault with and accordingly, i uphold the impugned order and reject the appeal.

Judgment:
1. The stay application has been filed seeking waiver of pre-deposit of interest amount of Rs. 53,917.45 confirmed under the impugned order.

Since I propose to dispose of the appeal itself on a short question of law, I grant waiver of pre-deposit of the amount and take up the appeal for decision with the consent of the parties. This appeal is directed against the Order-in-Appeal No. 17/2001 (M-III), dated 7-2-2002 passed by the Commissioner of Central Excise (Appeals), Chennai by which he has rejected the appeal of the appellants and upheld the order-in-original passed by the Assistant Commissioner who has confirmed the demand of interest of Rs. 53,917.45 on the wrongly availed Modvat credit.

2. The brief facts of the case are that the appellants are engaged in the manufacture of LPG (Brass) Cylinder valves falling under Chapter Heading 8481.80. They had availed deemed Modvat credit on Brass waste and scrap after filing required declaration under Rule 57G for the period July, 1991 to September, 1991. The deemed credit availed by the appellants was denied by the lower authority vide his order-in-original dated 11-11-92. On appeal, the Commissioner (Appeals) decided the issue in favour of the appellants vide his Order-in-Appeal dated 30-6-1993.

Aggrieved by the said order the department went in appeal before the CEGAT and CEGAT, New Delhi decided the matter in favour of the department vide Order No. 360/2000-B, dated 6-3-2000 [2001 (137) E.L.T.478 (T)] and set aside the order of the Commissioner (Appeals) by holding that since no duty has been paid on the defective/damaged valves which are the inputs used by the assessee, deemed credit was not available following the ratio of the Tribunal's decision in the case of Ankur Steels and Ors. v. CCE, reported in 1999 (31) RLT 322. Thereupon the appellants paid back the deemed credit of Rs. 55,300/-availed by debiting the same in the PLA on 19-6-2000. Since the assessees have failed to pay interest in spite of instructions from the department as a result of deciding the matter in department's favour, show cause notice was issued to them proposing to demand interest for the period from August, 1995 to June, 2000 for an amount of Rs. 53,917.45 and the same was confirmed by the original authority vide order-in-original dated 17-9-2001 and on appeal to the Commissioner (Appeals), the Commissioner (Appeals) upheld the order-in-original as noted above. It is against this order of the Commissioner (Appeals) that the appellants have come in appeal. In the grounds of appeal, the assessee-appellants, inter alia, stated as under : (a) It is imperative that the retrospective effect provided for the interest chargeable under Section 11AA had not been provided for under Modvat Rules i.e. under Rule 57-I(3). Under Rule 57-I (3), it was said that interest had to be demanded at the rate fixed under Section 11AA for the amount determined under subsection (2) of Section 11A. The emphasis is that the retrospective effect brought vide Explanation 2 to Section 11AA cannot be applied to the amount determined under Rule 57-I(3) of C.E. Rules, 1944, was not discussed in detail and in depth manner either by the Commissioner (Appeals) or the adjudicating authority who passed the O-in-O against which the assessee appealed to the Commissioner (Appeals).

(b) On appeal by the assessee, the Collector (Appeals) set aside the order-in-original of the Assistant Collector vide Order-in-Appeal No. 61/93 (M), dated 30-6-1993. From the date of the order-in-appeal by the Collector (Appeals), they were relieved from the disallowance of the Modvat credit by the then Assistant Collector of Central Excise, and there was no force in 1995 to the order-in-original passed by the Assistant Collector. At the time when Section 11AA came into force there was no demand from the departmental side and also no due arose even after three months of Section 11AA came into force as no valid order was available against them on the date.

(c) That the Commissioner (Appeals) had fixed the personal hearing on their stay petition at 12.30 hours on 23-1-2002. However they were heard only on 29-1-2002 on the stay petition and they were not given any chance to explain the grounds taken in the main appeal before him and hence the order-in-appeal passed by him is not in consonance with the principles of natural justice.

3. Shri R. Sasidharan learned Sr. Advocate for the appellants adverted to the facts of the case as narrated above and invited my attention to Section 11AA and explanations to the proviso to Section 11AA. He further submitted that the word "determined" means when the duty in dispute is finally settled by the Tribunal or a Court. The dispute in this case was finally settled by the Tribunal on 6-3-2000 by Order No.360/2000-B, dated 6-3-2000 and therefore, the interest can at best be charged from 6-3-2000 i.e. the date when the dispute was finally settled by the Tribunal. He further submitted that since the duty pertained to the period July, 91 to September, 91 and since Section 11AA has been introduced in the year 1995 and since there was no provision for levy of interest prior to introduction of Section 11AA no interest could be demanded on the duty which was not paid wrongly. He also submitted that Rule 57-I(5) clearly indicates the date from which the interest is to be paid i.e. from the first day of the month succeeding the month in which credit was wrongly taken till the date of payment of such duty, under Section 11AA of the Act. He, therefore, prayed for setting aside the impugned order.

4. Shri C. Mani, learned DR on the other hand submitted that Section 11AA clearly states that where a person chargeable with duty determined under Sub-section (2) of Section 11A fails to pay duty within three months from the date of determination, he shall pay interest in addition to duty. In the instant case, the Assistant Commissioner being the determining authority has determined the duty payable under Rule 57-I of the Central Excise Rules, 1944 and decided the issue on 11-11-1992. Since Section 11AA was introduced with effect from 26-5-1995 vide Section 73 of the Finance Act, 1995 (22 of 1995), interest is required to be paid from 26-8-1995 (i.e. three months after the introduction of Section 11AA at the rate prescribed under Section 11AA) till the date of payment of interest, under the provisions of Sub-rule (3) of Rule 57-I of the Central Excise Rules, 1944.

5. I have considered the rival submissions and gone through the case records. In this case, the duty was determined by the Assistant Commissioner on 11-11-92 when he decided the case that the appellants are liable to pay duty. However, the duty was finally paid by them on 19-6-2000 as a result of the appeal being decided against them by the Tribunal vide order No. 360/2000-B, dated 6-3-2000. The contention of the learned Counsel for the appellants that the duty was determined only when the Tribunal decided the matter on 6-3-2000 cannot be countenanced because the duty was first determined once the matter was decided by the proper officer and it was the assessee who being not satisfied of the decision of the Assistant Commissioner, filed appeal before the Commissioner (Appeals) who decided in their favour and on appeal by the department, the Tribunal decided the matter in favour of the Department. Therefore, the determination of the duty was done by the Assistant Commissioner on 11-11-92 itself and the Tribunal as the second appellate authority has only dealt with and settled the dispute between the two parties before it by confirming the order-in-original.

Therefore, it cannot be said that duty has been determined by the Tribunal. As regards the ground taken by the assessee that the interest provision cannot be applied to the past cases, I observe that in terms of the provisions contained in Sub-rule (3) of Rule 57-I, read with Section 11AA, where the duty amount has been determined before the date on which the Finance Bill, 1995 received the assent, interest is to be paid if the amount of duty is not paid, within three months from the date of the assent of the President at the rate as fixed by the CBEC under Section 11AA of the Central Excise Act, 1944 from the date immediately after the expiry of the said period of three months till the date of payment. In this case, the duty was determined on 11-11-1992 by the Assistant Commissioner. The date of introduction of the proviso to Section 11AA being 26-5-1995, interest was calculated from 26-8-1995 in terms of Rule 57-I{3) ibid. As rightly held by the original authority, the corresponding provision for levy of interest in Modvat Rules is Rule 57-I(3) of the Central Excise Rules. This rule is to be read in conjunction with Section 11AA and proviso thereto. In view of this clear legal provisions, the ground taken by the appellants that when Section 11AA came into force, there was no demand from the Revenue for payment of interest cannot be accepted. The appellants have also relied upon the order of the West Regional Bench of the Tribunal in the case of Mukand Ltd. v. CCE, Mumbai-I reported in 1996 (88) E.L.T. 725 wherein it was held that liability to interest under Section 11AA of the Central Excise Act, does not commence till the dispute is finally settled by the appellate authority/Court. It was also held that demand for recovery of interest when the matter is pending before the CEGAT was premature. The effect of this ruling is that the proceedings for recovery of interest cannot commence and has to be kept pending when the matter remains unsettled. In the case before me the show cause notice demanding interest was issued after the dispute was finally settled by the order of the Tribunal dated 6-3-2000 and the order of the Tribunal attained finality, since the assessee has not gone in appeal against the said order. Therefore, the said case law does not help the appellants.

6. As regards the other ground taken that they were not given any chance to make their points before the Commissioner (Appeals), I observe that the Commissioner (Appeals) in Para 4 of the order-in-appeal has clearly stated that Shri R. Radhakrishnan, MD and Shri B. Kumar, AO of the appellant-firm appeared and reiterated the grounds of appeal and it was after hearing them on the grounds of appeal, that the Commissioner (Appeals) proceeded to take up the appeal itself instead of the stay matter. The plea of the appellants that they have not been heard by the Commissioner (Appeals), therefore cannot be accepted. Before parting with this case, I would like to observe that in this case, duty of excise which was due to the department as far back as July, 91 - September, 1991, was not paid by the assessee till 19-6-2000, as they wrongly availed the benefit of Modvat credit and it was paid by them only on 19-6-2000. Thus they have enjoyed the benefit of non-payment of duty up to 18-6-2000. Therefore, they cannot have any grievance if they are asked to pay interest on the duty which was due to the Govt., but was not paid by them. The demand of interest is also fully backed by the law as discussed above. In view of the above discussion, I am of the considered opinion that the impugned order cannot be found fault with and accordingly, I uphold the impugned order and reject the appeal.